Against the Grain

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I’ve wanted to short the telecom (T, VZ) industry for as long as I can remember. I never understood how they could charge so much for data. Texts messages costing $20 a month? That’s insane, texts are tiny they cost the carriers nothing. Voice/Data/Texts they are all the same thing, bits of information being sent over a wireless network to the local tower before they travel by hard wire to the destination or to a distant cell tower before traveling the last 1% by wireless networks. I envisioned a price war that we are finally starting to see. I think ARPU (Average Revenue Per User) is going to keep declining. With user consuming more bandwidth, and more network demand profits are going to collapse. I’ve been waiting patiently for the business model to come under pressure (meanwhile the stocks are up 50% and have paid a solid dividend every year.

So is now the time to short the stocks? I still believe everything mentioned above. The cell company’s are going to war, the mobile phone pricing model is going to change. BUT, the companies are branching out. ATT and Verizon both offer TV service, ATT is offering security services. Verizon is offering smart home services. These companies have the wires and bandwidth to connect your home and to anything. Will they be the gatekeepers?

I’m sure I’m a couple years early on the telcos revival, so I guess I’d say short, but I think long term I’m a buyer.